Federal Treasurer Joe Hockey has given the first indication that the Coalition government may be willing to step in to support Qantas.
Speaking to Fairfax media on February 13, Hockey said that Qantas had requested the government provide a debt guarantee after the airline was downgraded by ratings agencies in December, and that the request met all four of the conditions he had imposed on such a request.
Hockey said the Qantas Sale Act which prevents the airline from foreign ownership of greater than 49 per cent was a “ball and chain” around the airline’s leg, and that competitor Virgin Australia, which has no such restrictions, was a “2,000 pound gorilla.”
“Number one is existing restrictions on the business imposed by the Parliament,” Hockey said. “Number two is if it’s an essential national service, and number three is if it is in an environment where other sovereigns are engaging in direct competition to the massive disadvantage of an Australian business, then you need to take that into account. And the fourth thing is the business has to do its own heavy lifting on its own reform. We are not going to run the business or tell them how to reform.”
Other government members also chimed in, with Liberal Senator Sean Edwards saying ”The Qantas Sale Act needs to go. This is a restriction on the management of Qantas, the likes of which no other airline in the world has to suffer.”
The government’s apparent change of heart came the day after Qantas CEO Alan Joyce addressed a Tourism Task Force forum, where he again called for a “level playing field” so his airline could compete fairly with Virgin and other foreign-owned airlines.
“At the heart of the discussion is the role of Qantas as national carrier,” Joyce said. “I think everyone agrees that Qantas plays a vital role in Australian life. Qantas is a resource for Australians in times of crisis. A partner for charities and good causes. And a bridge between regional Australia, our major cities and global markets. We spend around $6 billion each year on Australian goods and services. We also contribute over $1.4 billion in direct and indirect tax each year.”
“The power of that role should not be underestimated,” he added. “It is a role that we are proud to play. And it is a role that we want to continue playing for many decades to come. But to do so, we have to change – and so does government policy.”
Joyce added that the airline had never asked for a handout, and wasn’t asking for one now, but added, “Over the past five years, we have done everything in our control to reform Qantas for the changing global economy. But when one set of rules applies to Qantas, and another to our competitors, then a clear distortion exists.”
Joyce said the act limited the airline’s financial options, but admitted there was “little appetite” to repeal it. He instead asked the government to “look for other solutions” to address to uneven playing field.
Following Hockey’s remarks, Qantas released a brief statement saying it welcomed the Treasurer’s latest comments, and added that the airline’s discussions with government on levelling the playing field are ongoing, as is our work to strengthen our business.”
Unsurprisingly, Virgin Australia’s response to the Treasurer’s comments was not as positive. In a statement released on February 13, it said while it had “no issue with the government repealing the Qantas Sale Act,” it was less enthusiastic about the prospect of the debt guarantee. “What Australia does not need is the government giving Qantas a significant advantage through financial assistance, such as a taxpayer guarantee,” the statement read. “This would be to the detriment of the entire industry, including the smaller regional carriers. Any such guarantee should be given to all players.”
It added that Qantas already had “significant advantages” such as being the recipient of the majority of government travel, and holding much greater cash and asset reserves and a larger fleet than Virgin, and holding a superior credit rating.
“Qantas are in their current financial position because of their loss-making strategy of maintaining 65 per cent of the domestic aviation market at all costs,” the statement continued. “We believe this is at the detriment of the entire industry. Any form of government assistance to Qantas is a means to enabling them to reinstate their monopoly.”